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2016 (5) TMI 253 - AT - Income TaxBenefit of exemption under sec. 11 denied - A.O. was of the opinion that though, its objects are charitable in nature and activities are genuine, the activities carried out by the assessee are akin to any commercial activity and hence, computed the income under the head profits and gains of business or profession - Held that:- Admittedly, The Society is registered under sec. 12A of the Act and it is imparting education. It is not a case of A.O. that the objects are not charitable in nature and the activities of the assessee are not genuine. The A.O., one side admitted that the objects of the society are not under debate, nor any case is being made out for reconsideration of exemption allowable to assessee, but on the other hand, denied the exemption for the reason that the assessee gross receipts have increased over a period. On perusal of assessment order we find that the A.O. neither doubted the genuineness of the activities of the society, nor pointed out any violation referred to sec. 13(1)(c) or 13(1)(d), which are pre conditions for denying exemption u/s 11 of the Act. Therefore, we are of the opinion that the A.O. was not correct in denying exemption under sec. 11 and assessed income under the head profits and gains of business of profession. - Decided against revenue Applicability of provisions of sec. 40(a)(ia) and 43B when income computed under sec. 11, 12 & 13 of the Act - Held that:- If any expenditure is disallowed by invoking the provisions of section 40(a)(ia) and 43B, it leads to a situation where assessee income available for application is enhanced without being any real income for application for charitable purpose, which leads to an absurd situation where the trusts/societies enjoying exemption u/s 11 have to pay taxes. This is because, the assessee claiming exemption u/s 11, shall apply 85% of income for the purpose of objects of the Trust. The legislature in its wisdom has kept separate provisions which are independent from any other provisions of the Act for computation of income of trusts claiming exemption u/s 11 of the Act. Therefore, we are of the opinion that, when income is computed under sec. 11 of the Act, the provisions of sec. 40(a)(ia) & 43B are not applicable. Hence, the A.O. was not correct in disallowing the amounts by invoking the provisions of sec. 40(a)(ia) and 43B for failure to deduct TDS and failure to remit the unpaid liabilities. - Decided against revenue
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